Setting the Foundation for Your Next Fix and Flip, Part #2

Setting the Foundation for Your Next Fix and Flip, Part #2
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If you’re a fix and flipper, you’ve probably heard horror stories when it comes to bad foundations. It’s no secret that you want to walk away from serious foundation damage since it can really eat into your profits. 

In our previous blog post on foundation repair, we dove into some of the key insights of spotting a bad foundation and what you can do about it. Additionally, we covered that not every foundation issue is grounds for walking away. Sometimes, foundation repair can be completed without too much work.

The key is in knowing the difference. 

With a little effort, you can learn to gauge structural damage and if it can be fixed without wrecking your profits. That way, you’ll be better able to tell when the foundation damage is a deal-breaker and when it’s a good negotiating tool. That is, provided you can make the numbers work. 

How to Spot a Bad Foundation 

There are telltale signs of foundation damage you can use to estimate your involvement in a project. 

  • Cracks in walls
  • Cracks in the exterior
  • A shift in the exterior (bricks are cracking)
  • Cracks around door frames 
  • Doors that don’t close correctly
  • Uneven floors
  • Water in the basement or under the crawl space 
  • Large horizontal cracks
  • Each of these clues requires a closer inspection of the property with a critical eye. A little more effort upfront can save you thousands of dollars later.

Part of the ease of a foundation fix starts with the two types of foundations. 

  1. Slab Foundation – The property is built directly on the bedrock. 
  2. Pier and Beam – Allows for more movement, settling, and ventilation.

Knowing the foundation type is necessary for assessing the potential damage and the complications of foundation repair. When you know there are potential problems; then it’s an opportunity to negotiate the price down. That is, once you’ve done a full assessment. 

Is it feasible? Feasibility Studies, worth every dollar.

As such, at BMC, we require a feasibility study for our partners. First, we take a look at the borrower’s budget. Then, we have a general contractor go out and take a look at the property. Does the roof need to be replaced, or are there foundation issues? These are the types of questions that help you avoid surprise costs during renovation.

They’ll often catch things that the fix and flipper might not have noticed. If they recommend it, we’ll have an engineer inspect the property. They can determine the source of the problem and determine if the cost is worth it. 

This practice is so beneficial to the fix and flipper. If the engineer estimates the foundation repair costs are in the thousands, then any estimated profit margin can be destroyed. In these situations, it would be better to walk away. 

How Can You Work With BMC To Adjust The Rehab Budget?

Here at BMC, we work with experienced fix and flippers throughout the rehab process.  Because we value our relationship with our partners, we’ll help to eliminate profit-killing surprises like foundation damage. 

It all starts with the feasibility study. 

When you’re doing a fix and flip, you want to map out a budget. Check it and update it as needed to make sure the project is still profitable. A potentially big-ticket item like a foundation will likely require an adjusted budget and probably an extended timeline. 

How Do You Know When to Walk Away? 

Experienced flip and flippers know if the numbers don’t work, then you need to walk away. For example, if your goal is to turn a 20% profit and you run into an expensive foundation problem, then it’s time to renegotiate the price. If you can’t, then it’s probably time to walk away. 

Especially when your profits are razor-thin, they can be eaten up quickly with unforeseen issues. Our goal is to help our partners from beginning to end. 

In conclusion, we help you prevent rehab budget surprises so you have a profitable renovation business. If you’re looking for a partner in your renovation projects, then please consider applying for a loan with BMC for your next fix and flip. 


About Bay Mountain Capital:

Bay Mountain Capital has been in business for more than a decade, closing approximately 2,000 loans. We specialize in financing all types of residential and commercial property investments throughout Texas and Georgia. Using common sense and value-added approach, we strive to incorporate these principles into our underwriting and closing processes.

As a direct lender, Bay Mountain Capital can close a loan within one day after receiving a complete file and clear title. The process generally takes two weeks for a residential loan but can be accelerated where circumstances require it.

We are primarily an asset-based lender, which means that qualification requirements are limited. Our rates and fees are among the lowest in the industry.

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